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General Growth spinoff names CEO, president

Howard Hughes Corp., the U.S. real estate company spun off this month from General Growth Properties Inc., named David Weinreb chief executive officer and Grant Herlitz president.

Both have been working for the Dallas-based developer on a contract basis since August, Howard Hughes said in a statement today. The company, whose chairman is hedge-fund manager William Ackman, had been without a permanent CEO since its formation.

Weinreb is chairman and CEO of TPMC Realty Corp., a Dallas investment firm that has been advising Howard Hughes. During his 17 years as CEO of TPMC, he bought and repositioned underperforming real estate, Howard Hughes said. Herlitz was chief financial officer and, more recently, president of TPMC, where he has worked for 10 years.

“I have known both David and Grant for many years, and I share the confidence they have expressed in the future of the company as demonstrated by their substantial, long-term personal capital commitments,” Ackman said in the statement.

Weinreb and Herlitz agreed to purchase seven-year warrants for $17 million on about 2.7 million Howard Hughes common shares at $42.23 a share, the closing price on Nov. 19, the last full trading day before agreement on the terms, the company said. Howard Hughes stock has risen 14 percent since it began regular trading on the New York Stock Exchange on Nov. 10.

Residential and Commercial

Howard Hughes owns, manages and develops residential and commercial property in 18 states. Formed from 34 properties previously owned by General Growth, its assets include New York's South Street Seaport and four master-planned communities including Summerlin in Las Vegas.

Howard Hughes is “systematically assessing and strategically positioning our portfolio,” Weinreb said in the statement. The company has more than 200 employees.

Weinreb and Herlitz can't exercise their warrants for six years except in the event of a change of control, firing without cause, or departure “for good reason.” During that period, each executive is prohibited from selling, hedging, or otherwise reducing his stake in the shares underlying the warrants.

“They paid fair value for the warrants, given the illiquidity,” Ackman said in a telephone interview. Weinreb paid $15 million and Herlitz $2 million of the $17 million total, he said. “It's their own money. If the stock does nothing, they lose their investment.”

Seven Years

The $17 million cost works out to $6.30 a share, based on their right to buy about 2.7 million shares in seven years. That means if Howard Hughes shares rise above $48.53 by the exercise date, the executives will make money.

“These are redevelopment assets,” Ackman said. “If they do a good job, and are creative and smart, they can make a lot of money.”

Ackman said the warrants are a better management incentive than stock options because they require Weinreb and Herlitz to make a personal investment in the company.

“They paid for the warrants instead of being granted options,” he said. “It's not a gift. These guys made an investment alongside other investors.”

Howard Hughes shares rose 7 cents to $41.70 as of 4:15 p.m. today in New York Stock Exchange composite training.